Fashion tax

Inspired by the petrol price debate, there have been a couple of callers to the Radio Guernsey Moan In this morning about UK chains and franchises charging the same VAT-inclusive prices in Guernsey as they do in England, mostly it would seem in respect of clothing retailers. In the bizarre words of one caller, 'we shouldn't be paying this tax'.

Er, hello. We're not paying VAT. All that's happening is that the shops pocket as extra profit the money which would normally go to the Chancellor. So what is wrong with that? We have to expect that any shop is going to price their products to make as much profit as they can (in the long run of course). That's why those shops are successful, and that's why they can afford to be in the high street.

The prices of high street mainstays like clothing and cosmetics are driven by the economics of marketing and fashion, not manufacturing. The £40 upwards price tag on a pair of Reeboks has very little to do with the £7 they paid the sweatshop to manufacture them, or the £1 labour cost paid to the people who actually did the work. More than half the wholesale cost of a bottle of perfume is blown by the manufacturer on marketing and designing shiny bottles, and most of the rest is spent on working out how to copy competitor's products, giving product away to very rich people, and ruminating on what the next whim of the public might be. The retailer then stacks on their own costs, staff costs, glitzy displays, the cost of tester bottles and their profit margin. Only a miniscule fraction of what the customer pays actually goes into synthesizing the chemical cocktail in the bottle.

If you think it's worth spending £x because you want to have brand Y, then buy it and don't complain that company Z, owner of brand Y, spends a hefty wodge of your £x just to improve the level of kudos which comes with brand Y.

There is no cartel - if you don't think the brand you buy is giving you good value for money, you can chose a different one. There is no fraud - you pay the price on the ticket, with no hidden costs. So if the ticket price has another 17.5% stacked on, just for the Guernsey customer, and you still buy it, then that's really nobody's problem but yours. The ultimate difference is that whereas in the UK maybe 90% of the price goes to middlemen, in Guernsey it's maybe more like 92%.

In the economics of fashion, prices (and ultimately high street rents) are driven by what people feel they can afford to pay. Whether or not the ticket price contains VAT makes no difference.

If you aren't happy with it, there are plenty of shops on the Bridge, in Fountain Street, in the Pollet and on the Internet with lower rent bills, more enlightened pricing policies, and little or no fashion tax...